Member Info for Stockable

Zimbabwe’s poor image amongst many investors may go some way to explaining Caledonia’s focus on delivery. It’s the only effective tool in its armoury. Many AIM-listed resource stocks are fairly obviously lifestyle companies with the goal of mining what’s in investors’ pockets rather than what’s in the ground. While there are also plenty of “Explorers” working on the adage of “Why spoil a good mining project by digging a hole in the ground?”. Caledonia has to deliver to retain its listing.

But, however one views it, Zimbabwe is a risky jurisdiction. And there may be tides of public opinion that even its Government cannot control and, of course, factions that can’t be contained. But the same is true of much of the world and certainly most of Africa.

Caledonia's quarterly dividend probably goes some way to mitigate the risk. Investors are not simply banking on capital gains. Its dividend has risen from C$0.06 per share in 2014 to US$0.35 per share in 2020. And it has not plastered the world with paper. Over the last ten years, it has issued about US$2 million of new equity. While over the same period, it has raised less than US$10 million of debt. Since 2015, it has spent some US$63 million on developing its Central Shaft project (Extending the mine’s life to 2034). This has been almost entirely self-funded.

From my perspective, the risk is largely political. At an all-in sustaining cost of around US$1,000 per oz, the price of Gold would have to collapse to have a serious impact on the company. Financially and operationally, it appears sound.

By the way, it shows no appetite for expansion outside of Zimbabwe or even outside the Gold sector. It’s a pure Zimbabwean Gold play. It may be risky but it could be worth bearing in mind that mining is the country’s biggest foreign exchange earner. If it goes, then it’s game over for all concerned, that includes the country’s elites. Frankly, if the business was going to be expropriated (Stolen), it would have happened long ago. So the reversal of the recently proposed indigenization policy amendment should come as no surprise.

As a former shareholder of Wetherspoon, it strikes me as a little odd that Tim Martin’s disposal of some £50 million of his Wetherspoon’s holding has largely gone unnoticed. Someone so high profile and such a respected figure in the industry to make for the exit should, in my view, sound a few alarm bells. As a low-cost pub operator benefiting from many economies of scale, it seems like a strong candidate for surviving this COVID carnage. Of course, this could all be part of a grander plan. And maybe he will use the money for other ventures in the hospitality sector.

But what really concerns me is the likelihood of pandemics simply becoming more regular. I am not entirely convinced that this is a once in a lifetime event. It also seems likely that this virus could linger for an extended period - with the prospect of further lockdowns. And that raises major issues for businesses based upon large numbers of people concentrating into small areas.

Wetherspoon may have gone from being a low-risk business into the high-risk category entirely due to events outside its control. The quality (Reliability) of its earnings may be permanently diminished together with the value of its freeholds (Limited alternative use).

Jointhedots, excellent research. I would strongly advise any AAZ shareholders to take a very close look at the Zod mine video (The link is in your "More Zod" post. This appears to be undoctored and, if accurate, points to the Azerbaijani side of the mine being left in very good condition. No broken windows, no signs of intentional damage. Even locks on cupboards were still intact. For sure, there could be booby traps. But it shows troops walking around and I suspect that if it was potentially dangerous, filming would not have been allowed.

Incidentally, the US$300 million senior unsecured debt issued by GPM in June 2019 (At a yield of around 8%) is due to be repaid in June 2024. The vehicle is Karlou BV (Domiciled in the Netherlands) and interest payments are made bi-annually. The next one seems to be on 18th June 2021. Importantly, Karlou’s main asset looks to be the Zod mine. From what I can understand the market value of the bonds fell at the outset of the conflict in Nagorno-Karabakh but have subsequently risen. It doesn’t seem to indicate any prospect of problems with repayment of the capital. As for the ownership of the bonds. The largest holder appears to be RSHB (The Russian Agricultural Bank) - a bank owned by the Russian state.

With the capital of the Zod mine in working condition and no panic with the bonds, it strikes me that a deal could be in the offing. A non-functioning, formerly very lucrative Gold mine is in no one’s interest. The real issue may be who gets what? And that might involve discussions with bondholders.

fiveeights, I am no longer invested in President but it's still a company that I broadly follow. And, yes, I got out before the recent rise.

For fairly obvious reasons, much attention is given to the price of oil. But the price of natural gas has been very strong in recent days. It’s roughly double its market price in July 2020 and up around 20% since the start of this year. Very useful for a company that has pivoted towards gas. If successful, its drilling programme in Las Bases and Estancia Vieja (Beginning in March) may catch the tailwind of rising natural gas prices. As I have said before, it needs a tad of luck and it could be getting it.

Previous posters could well be correct with the chart analysis. However, I tend to believe that if charts are useful, it’s when there is a large volume of stock turnover. Anglo Asian is a reasonably well-traded stock by AIM standards. But its trading volume is still too low.

In my view, its stock price is far more likely to be linked to its production levels and the Gold price. With the former driven by what the company is doing or planning to do. So its price is probably linked to news flow rather than signals derived from charts.

For anyone who missed last Thursday evening’s Proactive event, there were no nasty surprises. The company largely went over areas it has already covered. That said, it pointed to a guidance production figure for this year roughly the same as last year. Which seems slightly odd given the COVID pandemic and the conflict in Nagorno-Karabakh impacting 2020. I would have thought that production levels would be expected to be higher year-on-year. However, I suspect that this may be connected to it developing its underground operations at the Gedabek open-pit mine and that interrupts current production. It does not appear to be a resource depletion issue.

On a broader note, it clearly has many opportunities to expand. To that end, it’s recruiting more people to facilitate that expansion. It also wants to operate in another jurisdiction. Should the Irish deal fall through then I suggest it will be looking elsewhere. As for the Irish deal, it seems to be coming down to the details.

In terms of the Contract Areas that it’s now recovering, it seemed a little reticent in revealing new information. The overall impression was that the Zod mine will require infrastructure to fully develop. At the same time, it could still be exploited. It’s only 41km (As the crow flies) to its processing facilities at Gedabek. So ore could be extracted and transported (Using equipment left on-site by the previous owners?) and then processed.

Importantly, a road linking Ordubad with Western Azerbaijan appears to be going ahead. And this should accelerate the development of the Contract Area.

Overall, it seemed to be very much in the company’s style of under-promising. Reminds me of the Ben Graham comment “In the short run, the market is a voting machine but in the long run it is a weighing machine”. Unlike most AIM-listed miners, it has not diluted shareholders by issuing endless amounts of paper and so it doesn’t need to aggressively sell itself. It appears focused on delivery through results.

In my opinion, the regained Contract Areas could propel the company into another league in a reasonable period of time (Very short for a mining company) and it has much scope for development within its current asset base. But it still comes with risk - it's overly dependent on its open-pit mine at Gedabek and, of course, peace in the region is not guaranteed.

Moving the narrative from boardroom intrigues to the huge and genuine potential for exploiting refractory Gold reserves, in my view, is essential for the company’s corporate development. And that ultimately means a higher share price and better finance terms.

As it stands, it has a very blurred message that is not reaching investors. The bottom line is that there is not much Gold in existence. It has been estimated that the world’s current supplies of Gold are about the size of a 21-metre cube. Extracting Gold by traditional mining methods is becoming increasingly dangerous and expensive. POG is one of the few companies that has the ability to extract Gold from refractory ore and Russia has huge reserves (Not resources) of this. That message does not seem to be reaching investors. Whether it’s perception or reality, intrigue and Russia do not sit well with investors. It needs to present a clear investment case to the market.

Not exactly the same but certainly similar, Highland Gold Mining was in, in my view, bought out on the cheap. The same could happen here. The former was bought at 300p per share. A price that neither reflected its potential nor the trajectory of the Gold price at the time. However, it was a premium of 20% over the one-month volume weighted average closing price before the offer was announced (It’s also worth pointing out that in an RNS announcing the takeover, the takeover price was a premium on the one, three and six months weighted average closing prices and a 4% premium to the previous day’s close). So I don’t think that TSG will be bought for a song. But the HGM takeover also included the provision that the offer price could be reduced to reflect the cost of any dividend paid during the offer period.

That said, the Russians are skating on thin ice. If majority shareholders are willing to take advantage of their position at the cost of smaller shareholders, it raises the question as to why one would invest in the first place. It may also have wider implications for Russian-listed companies. If there is to be a takeover, I don’t think it will be a steal in terms of the price. It could happen but I don’t think it would be a smart move when viewed more broadly.

Considering just how far its share price has risen since it was listed in 2015, it's quite amazing that Kainos gets virtually no coverage on this bulletin board. Its price is now up over 480% (Excluding dividends). Although I sold my shareholding in the company a long time ago, it has never quite moved off my radar. One of my prime reasons for selling was its over-dependence on the UK market and UK public sector contracts (For 2020, this was some 52% of turnover). What has changed my mind is its international development and the prospect of growth in overseas earnings. It appears to be a more diversified company. Importantly, it has an exceptional ROCE record, good margins and benefits from operational gearing. Debt-free and paying a small dividend, it has much going for it.

What puts me off the stock and what encouraged me to sell has more to do with its valuation. It sits on a prospective Price/Earnings to Growth ratio of 4. Basically, it seems to be fully valued. However, that thinking led me to sell the stock several years ago at a fraction of what it is today. It’s also easy to forget that this is a company with a global market. As such, it appears to have much mileage and may need to be valued against international technology companies. I am still interested.

Fallingknife1, A trivial point to some but not to me. A very rare bird indeed, at least on this bulletin board. Am pleased to have spotted the lesser known “Averaging up”. This is not to be confused with its cousin, the common or garden “Averaging down”. While the former is often associated with positive news, profitability and general management delivery. The latter can often be viewed in the AIM resources sector. Its favourite habitat appears to be consistent losses, placings and broken promises. It largely survives on a diet of jam (Tomorrow). Found in a variety of locations from leafy Surrey to difficult to spell, let alone pronounce, foreign hotspots. It thrives in a climate of rumours and ramps.

Yes, seeing an “Averaging up” has brightened my day. Buying stocks based upon good results strikes me as a sounder strategy than buying on the basis of hope.

Incentivising senior managers is not something I have an issue with. But I tend to agree with an earlier poster who pointed out that the metrics which Alexandrov will have to meet to qualify for his nil-cost options appear quite undemanding. In all fairness, this is par for the course when it comes to public companies. That said, I think that greater challenges should be demanded. For starters, it seems strange that he can obtain 25% of the options by simply ensuring that TSR are average when compared to the comparator group. It gives the impression of rewards for just “Turning up”. Putting a cost on the options may have given a clearer idea of what to expect in terms of a target share price. As it stands, a good comparative performance but a poor absolute performance will reward the CEO. This does not seem like a sound alignment of interests with shareholders.

Interestingly, according to the company’s 2019 annual report, the options also carry with them any dividends issued over the vesting period. So, this could incentivise Alexandrov to move the company into a dividend-paying model. That was a key attraction of Highland Gold, Alexandrov’s former employer. Giving it some perspective, the shares must be held for a further two years after the vesting period. And, presumably, the next tranche of free shares will only be offered after this tranche expires in three years.

When viewed from a balance sheet perspective, Trinity looks to be in a very strong position. No debt and accruing cash (It was aiming for a consolidated break-even of just US$20.50 by the year-end. Without hedging that increases to US$26/US$27 per barrel). But what could be seriously interesting is a revaluation of its onshore reserves based upon the 3D seismic acquired from Heritage Petroleum. Incidentally, from what I can understand, it has not booked some 3.2 mmstb of its 2C offshore West Coast resources (Presumably because it had intended to sell them).

On an EV/2P basis it still appears inexpensive at around US$1.14 per barrel. While its current market cap is probably backed by about 50% cash. As a slight aside, Latin America focused President Energy recently produced research on EV/2P values for its comparator group (12 companies). The average was US$5.9 BOE (President was at US$2.3 BOE). I would suggest that it's probably a reasonable peer group for Trinity.

Based purely on its cash assets and EV/2P and, in my opinion, it looks under-priced.

The lacklustre share price, in my view, simply reflects the production realities. As I have said before, it seems quite likely that President will exit 2020 with a genuine production level of at least 4,000 BOEPD. But this is largely a result of increased gas production. That’s good news in the sense that it has become a more diversified business. But it's now producing only slightly more oil than it was when it took over the Chevron assets in September 2017. From its interim results published in that month, it was producing 2,300-2,400 BOEPD at that point in time (That includes the production from the Chevron acquisition which came with a net 1,200 BOPD and not BOEPD). For the whole of 2017, it produced some 226 mmcf of natural gas. According to today’s RNS, and if I’m reading it correctly, it’s producing around 2,000 BOPD.

It seems to be struggling to exploit its oil assets. At the same time, its natural gas assets offer substantial upside but this appears to be long-term and piecemeal. What surprises me is just how little it has moved on in terms of oil production over the last three years.

Hate to say it but, in terms of technology stocks, the UK and Europe have a long way to go to catch up with the US and Asia. In my view, as a theme, technology has much mileage. But I keep coming back to the same problem. Many of the London-listed tech stocks seem to offer less growth potential than the foreign tech giants.

It was Jim Slater who famously said something to the effect that elephants don’t jump when referring to the growth prospects of large companies. But that was in the pre-internet days. Companies such as Apple have global markets and so the issue of scale may have to be viewed differently.

For me, it really comes down to how best to access the technology sector. I am not keen on passive investing and I’m quite wary of the ETF structure and how it will hold up in a real market crash. While some of these technology companies are so big and complex, they really require exhaustive and specialist research. In my opinion, the closed-ended active investment approach makes sense. The structure has stood the test of time while it also takes the wrong type of pressure off of fund managers. They are not compelled to sell in a falling market due to redemptions. And, of course, it’s not passive - I don’t want exposure to a stock simply based upon its market capitalisation.

But then it gets tricky. There are simply so many funds with overlapping holdings. For sure, Polar has performed well over a 10-year period but so have many others. Its costs are on the high side and it’s very dependent on a handful of US tech giants continuing to perform well: Some 70% of its holdings are from the US & Canada. And sitting in the back of my mind is the thought of a major attack on what are often near-monopolies. Will they be forced to break-up? Or will some left-field technological innovations knock them off their perches? Overall, big tech seems to be a very crowded trade. But it’s difficult to envisage a fragmentation of some of these businesses. There’s something about the Apple ecosystem and Facebook’s scale and depth that makes it difficult for new entrants.

At the moment, I’m not an investor in Polar but it’s certainly on my radar.

Yes, I take on board the very valid points mentioned. But I would like to see delivery in terms of stable production. Even if that means paying a higher price as it moves from being a developer to being a producer. What concerns me most is the possibility of technical issues that are, as yet, unknown. It's not producing widgets - Gold mining is inherently risky. So, for the moment, I will stay on the sidelines. That said, I do appreciate that risk/reward appetites may be different for other investors.

As a former shareholder of Highland Gold Mining, I was very disappointed with the 300p per share takeover offer for the company. But I was impressed with Denis Alexandrov's tenure as Highland's CEO. It's worth noting that it managed a substantial amount of debt (Mainly associated with its Kekura project) but also maintained its dividend distribution. He was also instrumental in ensuring that Kekura could move forward in very difficult conditions. Basically, as CEO of Highland he presided over the building of a successful business ranging from exploration to production. Had Highland Gold not been taken over, I would still be a shareholder. Of course, Petropavlovsk is an esoteric beast but an external appointment and a fresh approach, in my view, is most welcome.

As a rule, I don’t invest in loss-making businesses and I have no intention of breaking that rule anytime soon. That said, I have looked at Pure and it does seem to stand up to scrutiny. For starters, it’s a project in its final stages. It’s not pie in the sky. Full production is due, as a previous poster has pointed out, to commence in late Q1 2021. And there seems to be little to stop the company from achieving that; it’s worth mentioning that it’s fully funded. Very importantly, it has a low-cost structure with an expected all-in sustaining cost of just US$787 per oz and a 12-year life of mine. Strange, maybe, but what caught my attention was the sheer scale of drilling that it has conducted - some 1.2 million metres. Apparently, that equates to around 6.5 metres between each hole. So it seems fair to say that it knows what’s there: it estimates just over 1 million oz of probable reserves at 9g/t. And it's all underpinned by a very experienced management team in an excellent mining jurisdiction.

For the moment, I will not invest but it’s definitely on my radar.

For understandable reasons, much investor attention is now focused on China. Move outside that locale and there are many growth opportunities in Asia. Both Taiwan and India have increasingly close relationships with the US, as can be witnessed by their growing US Treasury bond purchases. At the same time, there seem to be efforts by multi-nationals to relocate their supply chains out of China and to other parts of Asia. So China is not the only investing game in town.

PAC has a focus on India with around a third of its assets in Indian stocks. Approximately 60% of its holdings are centred on India, Taiwan and Japan. It also heavily emphasises its ESG credentials. And goes as far as to insist that its managers sign its “Hippocratic Oath”. For some, that may not be a big deal but growing numbers of investors from family offices to foundations put ESG issues high on their list of priorities when investing.

With assets of around £400m, it’s still nimble and not anchored down by size or structure (It’s an investment trust with a closed-end, so liquidity is not a major issue). While its ongoing charges are a reasonable 1.19%. And it pays a modest dividend.

Just how PAC will perform in the longer-term is anyone’s guess. Aside from a dip earlier this year, mainly a result of a major fall in the Indian stock market, it has had a pretty solid five-year performance.

With the economic impacts of Brexit and COVID now starting to play out. And the UK Government’s coffers looking increasingly bare. Exposure to Asia, not just China, and what looks set to be the new economic focus may make a lot of sense. Even if only viewed as an insurance policy.

A little leftfield, maybe. But Peru has just issued some US$1 billion of 100-year bonds at around 170 basis points over US Treasuries. It seems to indicate a vote of confidence in copper prices given the country’s economic exposure to the metal. As a low-cost copper producer (Both its key assets are in the lower cash-cost quartile), the outlook for CAML appears relatively rosy. And, easy to forget, its copper output is from predictable and low-risk leaching. But it’s a tailings operation and has a finite life. So the next major move will almost certainly be a debt-financed acquisition. In the meantime, it continues comfortably to pay off its current debt. In general, I’m very dubious about debt-financed expansion. But CAML’s management has demonstrated a rare ability. Growth has been organic - building the Kounrad project from scratch and also through the successful acquisition of Sasa. At the same time, the owners of the business (Shareholders) have been rewarded through capital distributions. Unlike many other London-listed resource companies, the money raised from the markets has not disappeared down a series of plausible black holes. It appears to concentrate its efforts on mining for resources rather than mining the financial markets for cash.